Friday, April 7, 2017

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that WILLIAM T. WALTERS, a/k/a “Billy,” was found guilty on all 10 counts of conspiracy, securities fraud, and wire fraud charges after a four-week trial before U.S. District Judge P. Kevin Castel relating to his scheme to commit insider trading from 2008 through 2014, principally relating to securities of Dean Foods Company (“Dean Foods” or the “Company”).

Acting U.S. Attorney Joon H. Kim said: “Today, Billy Walters lost his bet that he could cheat the securities markets on a massive scale and get away with it scot-free. As a unanimous jury swiftly found, Walters received inside information about Dean Foods for years – directly from one its board members – and illegally traded on it, netting over $43 million. Armed with his illegal edge, Walters made huge, perfectly-timed trades, at times accounting for over a third of the trading volume in Dean Foods stock. In engaging in his years-long stock fraud scheme, Walters underestimated law enforcement’s resolve to pursue and catch those who cheat the market. The integrity of the American financial markets is a bedrock principle upon which our economy and justice system relies, and this Office and our partners at the FBI are as committed as ever to protecting it.”

According to the allegations in the charging documents and statements made in court proceedings:

From 2008 through 2014, WALTERS and Thomas C. Davis, among others, participated in a scheme to commit insider trading principally related to securities of Dean Foods, a Fortune 500 company that is the largest processor and distributor of fresh milk in the United States. Davis pled guilty to insider trading, perjury, and obstruction of justice charges on May 16, 2016 and has been cooperating with the investigation.

From 2001 until August 7, 2015, Davis served as a member of the Board of Directors of Dean Foods (the “Board”), and regularly possessed material, nonpublic information about Dean Foods, including about the Company’s financial performance and results, comprising quarterly earnings results; contemplated and actual corporate transactions; and other significant corporate and strategic developments (the “Inside Information”). In furtherance of the scheme, Davis violated his duties of trust and confidence to Dean Foods by providing Inside Information to WALTERS in advance of public announcements. WALTERS, knowing that Davis owed duties of trust and confidence to the Company, used the Inside Information to execute profitable trades in Dean Foods stock. In total, WALTERS’ trading on the basis of Inside Information netted realized and unrealized profits of approximately $32 million and avoided additional losses of approximately $11 million. In return for Davis providing the Inside Information to WALTERS, WALTERS, among other things, provided capital to Davis for joint business ventures and made two loans to Davis for approximately $1 million in total, which Davis largely did not repay.

In furtherance of the scheme, and to avoid detection by law enforcement, WALTERS provided Davis with a prepaid cellular phone to use when passing Inside Information to WALTERS. Moreover, WALTERS further instructed Davis to use code words when discussing the Inside Information, including by referring to Dean Foods as the “Dallas Cowboys.”

WALTERS, 70, of Las Vegas, Nevada, was convicted of one count of conspiracy to commit securities fraud, four counts of securities fraud, one count of conspiracy to commit wire fraud, and four counts of wire fraud. Count One carries a maximum sentence of five years in prison. Counts Two through 10 each carry a maximum sentence of 20 years in prison. The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense.

The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentence for WALTERS will be determined by the judge. WALTERS will be sentenced by Judge Castel on July 14, 2017.

Mr. Kim praised the work of the FBI and the Postal Inspection Service, and thanked the SEC and the Financial Industry Regulatory Authority (“FINRA”) for their assistance. He also thanked the Las Vegas offices of the FBI and the Internal Revenue Service, Criminal Investigation Division.